Final Pronouncement

January 2015
IPSAS 38

International Public Sector Accounting Standard™

Disclosure of Interests in
Other Entities
This document was developed and approved by the International Public Sector Accounting Standards
® ®
Board (IPSASB ).

The objective of the IPSASB is to serve the public interest by setting high-quality public sector accounting
standards and by facilitating the adoption and implementation of these, thereby enhancing the quality and
consistency of practice throughout the world and strengthening the transparency and accountability of
public sector finances.
™ ™
In meeting this objective the IPSASB sets International Public Sector Accounting Standards (IPSAS )
and Recommended Practice Guidelines (RPGs) for use by public sector entities, including national,
regional, and local governments, and related governmental agencies.

IPSAS relate to the general purpose financial statements (financial statements) and are authoritative.
RPGs are pronouncements that provide guidance on good practice in preparing general purpose financial
reports (GPFRs) that are not financial statements. Unlike IPSAS RPGs do not establish requirements.
Currently all pronouncements relating to GPFRs that are not financial statements are RPGs. RPGs do not
provide guidance on the level of assurance (if any) to which information should be subjected.

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Copyright © January 2015 by the International Federation of Accountants (IFAC ). For copyright,
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 IPSAS 38—DISCLOSURE OF INTERESTS IN OTHER ENTITIES
CONTENTS

Paragraph
Objective ............................................................................................................................... 1

Scope .................................................................................................................................... 2–6

Definitions.............................................................................................................................. 7–8

Binding Arrangement ...................................................................................................... 8

Disclosing Information about Interests in Other Entities ....................................................... 9–11

Significant Judgments and Assumptions .............................................................................. 12–14

Investment Entity Status ....................................................................................................... 15–16

Interests in Controlled Entities .............................................................................................. 17–26

The Interest that Non-controlling Interests have in the Economic Entity’s Activities
and Cash Flows ............................................................................................................. 19

The Nature and Extent of Significant Restrictions .......................................................... 20

Nature of the Risks Associated with an Entity’s Interests in Consolidated

Structured Entities .......................................................................................................... 21–24

Consequences of Changes in a Controlling Entity’s Ownership Interest in a

Controlled Entity that do not Result in a Loss of Control ................................................ 25
Consequences of Losing Control of a Controlled Entity During the Reporting Period ... 26

Interests in Unconsolidated Controlled Entities (Investment Entities) ................................. 27–34

Interests in Joint Arrangements and Associates ................................................................... 35–39

Nature, Extent and Financial Effects of an Entity’s Interests in Joint Arrangements
and Associates ............................................................................................................... 36–38

Risks Associated with an Entity’s Interests in Joint Ventures and Associates ............... 39

Interests in Structured Entities that are not Consolidated..................................................... 40–48

Nature of Interests .......................................................................................................... 43–45

Nature of Risks ............................................................................................................... 46–48

Non-quantifiable Ownership Interests ................................................................................... 49–50

Controlling Interests Acquired with the Intention of Disposal................................................ 51–57

Transitional Provisions .......................................................................................................... 58–60

Effective Date ........................................................................................................................ 61–62

Appendix A: Application Guidance

Appendix B: Amendments to Other IPSASs

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Basis for Conclusions

Comparison with IFRS 12

International Public Sector Accounting Standard 38, Disclosure of Interests in Other Entities, is set out in
paragraphs 1–62. All the paragraphs have equal authority. IPSAS 38 should be read in the context of its
objective, the Basis for Conclusions, and the Preface to International Public Sector Accounting Standards.
IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors, provides a basis for
selecting and applying accounting policies in the absence of explicit guidance.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Objective
1. The objective of this Standard is to require an entity to disclose information that enables users of its
financial statements to evaluate:

(a) The nature of, and risks associated with, its interests in controlled entities, unconsolidated
controlled entities, joint arrangements and associates, and structured entities that are not
consolidated; and

(b) The effects of those interests on its financial position, financial performance and cash flows.

Scope
2. An entity that prepares and presents financial statements under the accrual basis of
accounting shall apply this Standard in disclosing information about its interests in
controlled entities, unconsolidated controlled entities, joint arrangements and associates,
and structured entities that are not consolidated.
3. This Standard shall be applied by an entity that has an interest in any of the following:

(a) Controlled entities;

(b) Joint arrangements (i.e., joint operations or joint ventures);

(c) Associates; or

(d) Structured entities that are not consolidated.

4. This Standard does not apply to:

(a) Post-employment benefit plans or other long-term employee benefit plans to which
IPSAS 25, Employee Benefits applies.

(b) An entity’s separate financial statements to which IPSAS 34, Separate Financial
Statements, applies. However:

(i) If an entity has interests in structured entities that are not consolidated and
prepares separate financial statements as its only financial statements, it shall
apply the requirements in paragraphs 40–48 when preparing those separate
financial statements.

(ii) An investment entity that prepares financial statements in which all of its
controlled entities are measured at fair value through surplus or deficit in
accordance with paragraph 56 of IPSAS 35 shall present the disclosures relating
to investment entities required by this Standard.
(c) An interest held by an entity that participates in, but does not have joint control of, a
joint arrangement unless that interest results in significant influence over the
arrangement or is an interest in a structured entity.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(d) An interest in another entity that is accounted for in accordance with IPSAS 29, Financial
Instruments: Recognition and Measurement. However, an entity shall apply this
Standard:

(i) When that interest is an interest in an associate or a joint venture that, in

accordance with IPSAS 36, Investments in Associates and Joint Ventures, is
measured at fair value through surplus or deficit; or

(ii) When that interest is an interest in a structured entity that is not consolidated.

5. This Standard applies to all public sector entities other than Government Business
Enterprises (GBEs).

6. The Preface to International Public Sector Accounting Standards issued by the IPSASB explains
that GBEs apply IFRSs issued by the IASB. GBEs are defined in IPSAS 1, Presentation of
Financial Statements.

Definitions
7. The following terms are used in this Standard with the meanings specified:

Binding arrangement: For the purposes of this Standard, a binding arrangement is an

arrangement that confers enforceable rights and obligations on the parties to it as if it were
in the form of a contract. It includes rights from contracts or other legal rights.

An interest in another entity, for the purpose of this Standard, refers to involvement by way
of binding arrangements or otherwise that exposes an entity to variability of benefits from
the performance of the other entity. An interest in another entity can be evidenced by, but is
not limited to, the holding of equity or debt instruments as well as other forms of
involvement such as the provision of funding, liquidity support, credit enhancement and
guarantees. It includes the means by which an entity has control or joint control of, or
significant influence over, another entity. An entity does not necessarily have an interest in
another entity solely because of a typical funder/recipient or customer/supplier relationship.
Paragraphs AG7–AG9 provide further information about interests in other entities.

Paragraphs AG57–AG59 of IPSAS 35, Consolidated Financial Statements explain variability of

benefits.
Revenue from a structured entity, for the purpose of this Standard, includes, but is not
limited to, recurring and non-recurring fees, interest, dividends or similar distributions,
gains or losses on the remeasurement or derecognition of interests in structured entities
and gains or losses from the transfer of assets and liabilities to the structured entity.

A structured entity is:

(a) In the case of entities where administrative arrangements or legislation are normally
the dominant factors in deciding who has control of an entity, an entity that has been
designed so that administrative arrangements or legislation are not the dominant
factors in deciding who controls the entity, such as when binding arrangements are
significant to determining control of the entity and relevant activities are directed by
means of binding arrangements; or

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(b) In the case of entities where voting or similar rights are normally the dominant factor
in deciding who has control of an entity, an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding who controls the entity,
such as when any voting rights relate to administrative tasks only and the relevant
activities are directed by means of binding arrangements.
Paragraphs AG20–AG23 provide further information about structured entities.

Terms defined in other IPSASs are used in this Standard with the same meaning as in those
Standards, and are reproduced in the Glossary of Defined Terms published separately. The
following terms are defined in either IPSAS 34, Separate Financial Statements, IPSAS 35,
Consolidated Financial Statements, IPSAS 36, Investments in Associates and Joint Ventures
or IPSAS 37, Joint Arrangements: associate, consolidated financial statements, control,
controlled entity, controlling entity, economic entity, equity method, investment entity, joint
arrangement, joint control, joint operation, joint venture, non-controlling interest, relevant
activities, separate financial statements, separate vehicle and significant influence.

Binding Arrangement

8. Binding arrangements can be evidenced in several ways. A binding arrangement is often, but not
always, in writing, in the form of a contract or documented discussions between the parties.
Statutory mechanisms such as legislative or executive authority can also create enforceable
arrangements, similar to contractual arrangements, either on their own or in conjunction with
contracts between the parties.
Disclosing Information about Interests in Other Entities
9. To meet the objective in paragraph 1, an entity shall disclose:

(a) The significant judgments and assumptions it has made in determining:

(i) The nature of its interest in another entity or arrangement;

(ii) The type of joint arrangement in which it has an interest (paragraphs 12–14); and

(iii) That it meets the definition of an investment entity, if applicable (paragraph 15);
and

(b) Information about its interests in:

(i) Controlled entities (paragraphs 17–26);

(ii) Joint arrangements and associates (paragraphs 35–39);

(iii) Structured entities that are not consolidated (paragraphs 40–48);

(iv) Non-quantifiable ownership interests (paragraphs 49–50); and

(v) Controlling interests acquired with the intention of disposal (paragraphs 51–57).

10. If the disclosures required by this Standard, together with disclosures required by other
IPSASs, do not meet the objective in paragraph 1, an entity shall disclose whatever
additional information is necessary to meet that objective.

11. An entity shall consider the level of detail necessary to satisfy the disclosure objective in
paragraph 1 and how much emphasis to place on each of the requirements in this Standard.
It shall aggregate or disaggregate disclosures so that useful information is not obscured by

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

either the inclusion of a large amount of insignificant detail or the aggregation of items that
have different characteristics (see paragraphs AG2–AG6).

Significant Judgments and Assumptions

12. An entity shall disclose the methodology used to determine:
(a) That it has control of another entity as described in paragraphs 18 and 20 of IPSAS 35;

(b) That it has joint control of an arrangement or significant influence over another entity;
and

(c) The type of joint arrangement (i.e., joint operation or joint venture) when the
arrangement has been structured through a separate vehicle.

13. The disclosures required by paragraph 12 shall be either given in the financial statements or
incorporated by cross-reference from the financial statements to some other statement that
is available to users of the financial statements on the same terms as the financial
statements and at the same time. Without the information incorporated by cross-reference,
the financial statements are incomplete. The use of such cross-referencing may be subject
to jurisdictional restrictions.

14. To comply with paragraph 12, an entity shall disclose, for example, the factors considered in
determining that:

(a) It controls a specific entity (or similar category of entities) where the interest in the other
entity is not evidenced by the holding of equity or debt instruments;
(b) It does not control another entity (or category of entities) even though it holds more than
half of the voting rights of the other entity (or entities);

(c) It controls another entity (or category of entities) even though it holds less than half of
the voting rights of the other entity (or entities);

(d) It is an agent or a principal (see paragraphs AG60–AG74 of IPSAS 35);

(e) It does not have significant influence even though it holds 20 per cent or more of the
voting rights of another entity; and

(f) It has significant influence even though it holds less than 20 per cent of the voting rights
of another entity.

Investment Entity Status

15. When a controlling entity determines that it is an investment entity in accordance with
IPSAS 35, the investment entity shall disclose information about significant judgments and
assumptions it has made in determining that it is an investment entity. An investment entity
is not required to disclose this information if it has all of the characteristics in paragraph 61
of IPSAS 35.

16. When an entity becomes, or ceases to be, an investment entity, it shall disclose the change
of investment entity status and the reasons for the change. In addition, an entity that
becomes an investment entity shall disclose the effect of the change of status on the
financial statements for the period presented, including:

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(a) The total fair value, as of the date of change of status, of the controlled entities that
cease to be consolidated;

(b) The total gain or loss, if any, calculated in accordance with paragraph 63 of IPSAS 35;
and

(c) The line item(s) in surplus or deficit in which the gain or loss is recognized (if not
presented separately).

Interests in Controlled Entities

17. An entity shall disclose information that enables users of its consolidated financial
statements:

(a) To understand:
(i) The composition of the economic entity; and

(ii) The interest that non-controlling interests have in the economic entity’s activities
and cash flows (paragraph 19); and

(b) To evaluate:

(i) The nature and extent of significant restrictions on its ability to access or use
assets, and settle liabilities, of the economic entity (paragraph 20);

(ii) The nature of, and changes in, the risks associated with its interests in
consolidated structured entities (paragraphs 21–24);

(iii) The consequences of changes in its ownership interest in a controlled entity that
do not result in a loss of control (paragraph 25); and

(iv) The consequences of losing control of a controlled entity during the reporting
period (paragraph 26).
18. When the financial statements of a controlled entity used in the preparation of consolidated
financial statements are as of a date or for a period that is different from that of the
consolidated financial statements (see paragraph 46 of IPSAS 35) an entity shall disclose:
(a) The date of the end of the reporting period of the financial statements of that controlled
entity; and

(b) The reason for using a different date or period.

The Interest that Non-controlling Interests have in the Economic Entity’s Activities and
Cash Flows

19. An entity shall disclose for each of its controlled entities that have non-controlling interests
that are material to the reporting entity:

(a) The name of the controlled entity;

(b) The domicile and legal form of the controlled entity and the jurisdiction in which it
operates;

(c) The proportion of ownership interests held by non-controlling interests;

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(d) The proportion of voting rights held by non-controlling interests, if different from the
proportion of ownership interests held;

(e) The surplus or deficit allocated to non-controlling interests of the controlled entity
during the reporting period;

(f) Accumulated non-controlling interests of the controlled entity at the end of the reporting
period; and

(g) Summarized financial information about the controlled entity (see paragraph AG10).

The Nature and Extent of Significant Restrictions

20. An entity shall disclose:

(a) Significant restrictions in binding arrangements (e.g., statutory, contractual and

regulatory restrictions) on its ability to access or use the assets and settle the liabilities
of the economic entity, such as:

(i) Those that restrict the ability of a controlling entity or its controlled entities to
transfer cash or other assets to (or from) other entities within the economic
entity.

(ii) Guarantees or other requirements that may restrict dividends and other capital
distributions being paid, or loans and advances being made or repaid, to (or
from) other entities within the economic entity.

(b) The nature and extent to which protective rights of non-controlling interests can
significantly restrict the entity’s ability to access or use the assets and settle the
liabilities of the economic entity (such as when a controlling entity is obliged to settle
liabilities of a controlled entity before settling its own liabilities, or approval of non-
controlling interests is required either to access the assets or to settle the liabilities of a
controlled entity).

(c) The carrying amounts in the consolidated financial statements of the assets and
liabilities to which those restrictions apply.

Nature of the Risks Associated with an Entity’s Interests in Consolidated Structured Entities

21. An entity shall disclose the terms of any binding arrangements that could require the
controlling entity or its controlled entities to provide financial support to a consolidated
structured entity, including events or circumstances that could expose the reporting entity
to a loss (e.g., liquidity arrangements or credit rating triggers associated with obligations to
purchase assets of the structured entity or provide financial support).
22. If during the reporting period a controlling entity or any of its controlled entities has, without
having an obligation under a binding arrangement to do so, provided financial or other
support to a consolidated structured entity (e.g., purchasing assets of, or instruments
issued by, the structured entity), the entity shall disclose:

(a) The type and amount of support provided, including situations in which the controlling
entity or its controlled entities assisted the structured entity in obtaining financial
support; and

(b) The reasons for providing the support.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

23. If during the reporting period a controlling entity or any of its controlled entities has, without
having an obligation under a binding arrangement to do so, provided financial or other
support to a previously unconsolidated structured entity and that provision of support
resulted in the entity controlling the structured entity, the entity shall disclose an
explanation of the relevant factors in reaching that decision.
24. An entity shall disclose any current intentions to provide financial or other support to a
consolidated structured entity, including intentions to assist the structured entity in
obtaining financial support.

Consequences of Changes in a Controlling Entity’s Ownership Interest in a Controlled Entity that

do not Result in a Loss of Control

25. An entity shall present a schedule that shows the effects on the net assets/equity
attributable to owners of the controlling entity of any changes in its ownership interest in a
controlled entity that do not result in a loss of control.

Consequences of Losing Control of a Controlled Entity During the Reporting Period

26. An entity shall disclose the gain or loss, if any, calculated in accordance with paragraph 52
of IPSAS 35 and:

(a) The portion of that gain or loss attributable to measuring any investment retained in the
former controlled entity at its fair value at the date when control is lost; and

(b) The line item(s) in surplus or deficit in which the gain or loss is recognized (if not
presented separately).

Interests in Unconsolidated Controlled Entities (Investment Entities)

27. An investment entity that, in accordance with IPSAS 35 is required to apply the exception to
consolidation and instead account for its investment in a controlled entity at fair value
through surplus or deficit shall disclose that fact.

28. For each unconsolidated controlled entity, an investment entity shall disclose:

(a) The controlled entity’s name;

(b) The domicile and legal form of the controlled entity and the jurisdiction in which it
operates; and

(c) The proportion of ownership interest held by the investment entity and, if different, the
proportion of voting rights held.

29. If an investment entity is the controlling entity of another investment entity, the controlling
entity shall also provide the disclosures in paragraph 28(a)–(c) for investments that are
controlled by its controlled investment entity. The disclosure may be provided by including,
in the financial statements of the controlling entity, the financial statements of the controlled
entity (or controlled entities) that contain the above information.

30. An investment entity shall disclose:

(a) The nature and extent of any significant restrictions arising from binding
arrangements (e.g., resulting from borrowing arrangements, regulatory requirements
or contractual arrangements) on the ability of an unconsolidated controlled entity to

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

transfer funds to the investment entity in the form of cash dividends, or similar
distributions, or to repay loans or advances made to the unconsolidated controlled
entity by the investment entity; and

(b) Any current commitments or intentions to provide financial or other support to an

unconsolidated controlled entity, including commitments or intentions to assist the
controlled entity in obtaining financial support.

31. If, during the reporting period, an investment entity or any of its controlled entities has,
without having an obligation arising from a binding arrangement to do so, provided financial
or other support to an unconsolidated controlled entity (e.g., purchasing assets of, or
instruments issued by, the controlled entity or assisting the controlled entity in obtaining
financial support), the entity shall disclose:
(a) The type and amount of support provided to each unconsolidated controlled entity;
and

(b) The reasons for providing the support.

32. An investment entity shall disclose the terms of any binding arrangements that could
require the entity or its unconsolidated controlled entities to provide financial support to an
unconsolidated, controlled, structured entity, including events or circumstances that could
expose the reporting entity to a loss (e.g., liquidity arrangements or credit rating triggers
associated with obligations to purchase assets of the structured entity or to provide
financial support).

33. If during the reporting period an investment entity or any of its unconsolidated controlled
entities has, without having an obligation arising from a binding arrangement to do so,
provided financial or other support to an unconsolidated, structured entity that the
investment entity did not control, and if that provision of support resulted in the investment
entity controlling the structured entity, the investment entity shall disclose an explanation of
the relevant factors in reaching the decision to provide that support.

34. A controlling entity that controls an investment entity and is not itself an investment entity,
shall disclose in its consolidated financial statements, the information required by
paragraphs 27 to 33 in respect of such unconsolidated controlled entities.

Interests in Joint Arrangements and Associates

35. An entity shall disclose information that enables users of its financial statements to
evaluate:

(a) The nature, extent and financial effects of its interests in joint arrangements and
associates, including the nature and effects of its relationship with the other investors
with joint control of, or significant influence over, joint arrangements and associates
(paragraphs 36 and 38); and

(b) The nature of, and changes in, the risks associated with its interests in joint ventures
and associates (paragraph 39).

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Nature, Extent and Financial Effects of an Entity’s Interests in Joint Arrangements and Associates

36. An entity shall disclose:

(a) For each joint arrangement and associate that is material to the reporting entity:

(i) The name of the joint arrangement or associate;

(ii) The nature of the entity’s relationship with the joint arrangement or associate
(by, for example, describing the nature of the activities of the joint arrangement
or associate and whether they are strategic to the entity’s activities);

(iii) The domicile and legal form of the joint arrangement or associate and the
jurisdiction in which it operates; and

(iv) The proportion of ownership interest or participating share held by the entity
and, if different, the proportion of voting rights held (if applicable).

(b) For each joint venture and associate that is material to the reporting entity:

(i) Whether the investment in the joint venture or associate is measured using the
equity method or at fair value;

(ii) Summarized financial information about the joint venture or associate as

specified in paragraphs AG12 and AG13; and

(iii) If the joint venture or associate is accounted for using the equity method, the fair
value of its investment in the joint venture or associate, if there is a quoted
market price for the investment.

(c) Financial information as specified in paragraph AG16 about the entity’s investments in
joint ventures and associates that are not individually material:

(i) In aggregate for all individually immaterial joint ventures; and

(ii) In aggregate for all individually immaterial associates. This aggregated

information is to be disclosed separately from the aggregated information on
joint ventures.

37. An investment entity need not provide the disclosures required by paragraphs 36(b)–36(c).

38. An entity shall also disclose:

(a) The nature and extent of any significant restrictions (e.g., resulting from borrowing
arrangements, regulatory requirements or binding arrangements between investors with
joint control of, or significant influence over, a joint venture or an associate) on the
ability of joint ventures or associates to transfer funds to the entity in the form of cash
dividends or similar distributions, or to repay loans or advances made by the entity.

(b) When the financial statements of a joint venture or associate used in applying the equity
method are as of a date or for a period that is different from that of the entity:

(i) The date of the end of the reporting period of the financial statements of that
joint venture or associate; and

(ii) The reason for using a different date or period.

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(c) The unrecognized share of losses of a joint venture or associate, both for the reporting
period and cumulatively, if the entity has stopped recognizing its share of losses of the
joint venture or associate when applying the equity method.

Risks Associated with an Entity’s Interests in Joint Ventures and Associates

39. An entity shall disclose:

(a) Commitments that it has relating to its joint ventures separately from the amount of
other commitments as specified in paragraphs AG17–AG19; and

(b) In accordance with IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets,
unless the probability of loss is remote, contingent liabilities incurred relating to its
interests in joint ventures or associates (including its share of contingent liabilities
incurred jointly with other investors with joint control of, or significant influence over,
the joint ventures or associates), separately from the amount of other contingent
liabilities.

Interests in Structured Entities that are not Consolidated

40. An entity shall disclose information that enables users of its financial statements:

(a) To understand the nature and extent of its interests in structured entities that are not
consolidated (paragraphs 43–45); and

(b) To evaluate the nature of, and changes in, the risks associated with its interests in
structured entities that are not consolidated (paragraphs 46–48).

41. The information required by paragraph 40(b) includes information about an entity’s exposure to risk
from involvement that it had with structured entities that are not consolidated in previous periods
(e.g., sponsoring the structured entity), even if the entity no longer has any involvement by way of
binding arrangement with the structured entity at the reporting date.

42. An investment entity need not provide the disclosures required by paragraph 40 for a structured
entity that it controls but which is not consolidated, and for which it presents the disclosures
required by paragraphs 27–33.

Nature of Interests

43. An entity shall disclose qualitative and quantitative information about its interests in
structured entities that are not consolidated, including, but not limited to, the nature,
purpose, size and activities of the structured entity and how the structured entity is
financed.
44. If an entity has sponsored a structured entity that is not consolidated for which it does not
provide information required by paragraph 46 (e.g., because it does not have an interest in
the entity at the reporting date), the entity shall disclose:
(a) How it has determined which structured entities it has sponsored;

(b) Revenue from those structured entities during the reporting period, including a
description of the types of revenue presented; and

(c) The carrying amount (at the time of transfer) of all assets transferred to those structured
entities during the reporting period.

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45. An entity shall present the information in paragraph 44(b) and (c) in tabular format, unless
another format is more appropriate, and classify its sponsoring activities into relevant
categories (see paragraphs AG2–AG6).

Nature of Risks

46. An entity shall disclose in tabular format, unless another format is more appropriate, a
summary of:

(a) The carrying amounts of the assets and liabilities recognized in its financial statements
relating to its interests in structured entities that are not consolidated;
(b) The line items in the statement of financial position in which those assets and liabilities
are recognized;

(c) The amount that best represents the entity’s maximum exposure to loss from its
interests in structured entities that are not consolidated, including how the maximum
exposure to loss is determined. If an entity cannot quantify its maximum exposure to
loss from its interests in structured entities that are not consolidated it shall disclose
that fact and the reasons; and

(d) A comparison of the carrying amounts of the assets and liabilities of the entity that
relate to its interests in structured entities that are not consolidated and the entity’s
maximum exposure to loss from those entities.

47. If during the reporting period an entity has, without having an obligation under a binding
arrangement to do so, provided financial or other support to a structured entity that is not
consolidated in which it previously had or currently has an interest (for example, purchasing
assets of, or instruments issued by, the structured entity), the entity shall disclose:

(a) The type and amount of support provided, including situations in which the entity
assisted the structured entity in obtaining financial support; and

(b) The reasons for providing the support.

48. An entity shall disclose any current intentions to provide financial or other support to a
structured entity that is not consolidated, including intentions to assist the structured entity
in obtaining financial support. Such current intentions include intentions to provide support
as a result of obligations under binding arrangements and intentions to provide support
where the entity has no obligation under a binding arrangement.

Non-quantifiable Ownership Interests

49. An entity shall disclose information that enables users of its financial statements to
understand the nature and extent of any non-quantifiable ownership interests in other
entities.

50. To the extent that this information has not already been provided in accordance with this
Standard, an entity shall disclose, in respect of each non-quantifiable ownership interest
that is material to the reporting entity:

(a) The name of the entity in which it has an ownership interest; and

(b) The nature of its ownership interest in the entity.

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Controlling Interests Acquired with the Intention of Disposal

51. An entity, other than an investment entity, shall disclose information regarding its interest in
a controlled entity when, at the point at which control arose, the entity had the intention of
disposing of that interest and, at the reporting date, it has an active intention to dispose of
that interest.

52. There are a number of situations in which a public sector entity may obtain control of another entity,
but where the entity has an active intention to dispose of all or part of its controlling interest in the
near future.

53. Because of a government’s broad responsibility for the economic well-being of a jurisdiction it may
intervene to prevent the consequences of failure of an entity, such as a financial institution. Such
interventions may lead to a government obtaining control of another entity, although it has no
intention of maintaining control over that entity. Rather, its intention may be to sell, or otherwise
dispose of, its interest in the controlled entity. If the other entity needs to be restructured to facilitate
disposal the restructuring can occur over a period of one or more years and the government may
retain some residual assets or liabilities at the end of the process. The consolidation of such
controlled entities for the reporting periods in which control is present, can have a significant impact
on the consolidated financial statements. The obtaining of control as a result of interventions to
prevent failure is most likely to occur in the context of governments, but could also occur in the
case of individual public sector entities.

54. A public sector entity may also acquire a controlling interest in another entity, with the intention of
disposing of all or part of that interest, in implementing a government’s policy objectives. For
example, a government may direct an entity to acquire certain interests in other entities for the
purpose of redistribution.

55. An entity shall disclose the following information in the notes in respect of each controlled
entity referred to in paragraph 51:

(a) The name of the controlled entity and a description of its key activities;

(b) The rationale for the acquisition of the controlling interest and the factors considered
in determining that control exists;
(c) The impact on the consolidated financial statements of consolidating the controlled
entity including the effect on assets, liabilities, revenue, expenses and net
assets/equity; and
(d) The current status of the approach to disposal, including the expected method and
timing of disposal.

56. The disclosures required by paragraph 55 shall be provided at each reporting date until the
entity disposes of the controlling interest or ceases to have the intention to dispose of that
interest. In the period in which the entity disposes of the controlling interest or ceases to
have the intention to dispose of the controlling interest it shall disclose:

(a) The fact that there has been a disposal or change of intention; and

(b) The effect of the disposal or change of intention on the consolidated financial
statements.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

57. Where other disclosures required by this Standard or other IPSASs would provide
information relevant to paragraphs 55 or 56 a cross-reference to those other disclosures
shall be provided.

Transitional Provisions
58. An entity is encouraged to provide information required by this Standard earlier than annual periods
beginning on or after January 1, 2017. Providing some of the disclosures required by this Standard
does not compel the entity to comply with all the requirements of this Standard or to apply
IPSAS 34, IPSAS 35, IPSAS 36, and IPSAS 37 early.

59. The disclosure requirements of this Standard need not be applied for any period presented that
begins before the annual period immediately preceding the first annual period for which this
Standard is applied.

60. The disclosure requirements of paragraphs 40–56 and the corresponding guidance in
paragraphs AG20–AG25 of this Standard need not be applied for any period presented that begins
before the first annual period for which this Standard is applied.

Effective Date
61. An entity shall apply this Standard for annual financial statements covering periods
beginning on or after January 1, 2017. Earlier application is encouraged.

62. When an entity adopts the accrual basis IPSASs as defined in IPSAS 33, First-time Adoption of
Accrual Basis International Public Sector Accounting Standards (IPSASs), for financial reporting
purposes subsequent to this effective date, this Standard applies to the entity’s annual financial
statements covering periods beginning on or after the date of adoption of IPSASs.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Appendix A

Application Guidance
This Appendix is an integral part of IPSAS 38.

AG1. The examples in this appendix portray hypothetical situations. Although some aspects of the
examples may be present in actual fact patterns, all relevant facts and circumstances of a
particular fact pattern would need to be evaluated when applying this Standard.

Aggregation (paragraph 11)

AG2. An entity shall decide, in the light of its circumstances, how much detail it provides to satisfy
the information needs of users, how much emphasis it places on different aspects of the
requirements and how it aggregates the information. It is necessary to strike a balance
between burdening financial statements with excessive detail that may not assist users of
financial statements and obscuring information as a result of too much aggregation.
AG3. An entity may aggregate the disclosures required by this Standard for interests in similar
entities if aggregation is consistent with the disclosure objective and the requirement in
paragraph AG4, and does not obscure the information provided. An entity shall disclose how
it has aggregated its interests in similar entities.

AG4. An entity shall present information separately for interests in:

(a) Controlled entities;

(b) Joint ventures;

(c) Joint operations;

(d) Associates; and

(e) Structured entities that are not consolidated.

AG5. In determining whether to aggregate information, an entity shall consider quantitative and
qualitative information about the different risk and benefit characteristics of each entity it is
considering for aggregation and the significance of each such entity to the reporting entity.
The entity shall present the disclosures in a manner that clearly explains to users of financial
statements the nature and extent of its interests in those other entities.
AG6. Examples of aggregation levels within the classes of entities set out in paragraph AG4 that
might be appropriate are:

(a) Nature of activities (e.g., a research and development entity, a revolving credit card
securitization entity).

(b) Industry classification.

(c) Geography (e.g., country or region).

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Interests in Other Entities

AG7. An interest in another entity refers to involvement by way of binding arrangements or
otherwise that exposes the reporting entity to variability of benefits from the performance of
the other entity. Consideration of the purpose and design of the other entity may help the
reporting entity when assessing whether it has an interest in that entity and, therefore,
whether it is required to provide the disclosures in this Standard. That assessment shall
include consideration of the risks that the other entity was designed to create and the risks
the other entity was designed to pass on to the reporting entity and other parties.

AG8. A reporting entity is typically exposed to variability of benefits from the performance of
another entity by holding instruments (such as equity or debt instruments issued by the other
entity) or having another involvement that absorbs variability. For example, assume a
structured entity holds a loan portfolio. The structured entity obtains a credit default swap
from another entity (the reporting entity) to protect itself from the default of interest and
principal payments on the loans. The reporting entity has involvement that exposes it to
variability of benefits from the performance of the structured entity because the credit default
swap absorbs variability of benefits, in the form of returns, of the structured entity.

AG9. Some instruments are designed to transfer risk from a reporting entity to another entity. Such
instruments create variability of benefits for the other entity but do not typically expose the
reporting entity to variability of benefits from the performance of the other entity. For example,
assume a structured entity is established to provide investment opportunities for investors
who wish to have exposure to entity Z’s credit risk (entity Z is unrelated to any party involved
in the arrangement). The structured entity obtains funding by issuing to those investors notes
that are linked to entity Z’s credit risk (credit-linked notes) and uses the proceeds to invest in
a portfolio of risk-free financial assets. The structured entity obtains exposure to entity Z’s
credit risk by entering into a credit default swap (CDS) with a swap counterparty. The CDS
passes entity Z’s credit risk to the structured entity in return for a fee paid by the swap
counterparty. The investors in the structured entity receive higher benefits that reflect both
the structured entity’s return from its asset portfolio and the CDS fee. The swap counterparty
does not have involvement with the structured entity that exposes it to variability of benefits
from the performance of the structured entity because the CDS transfers variability to the
structured entity, rather than absorbing variability of benefits of the structured entity.

Summarized Financial Information for Controlled Entities, Joint Ventures and

Associates (paragraphs 19 and 36)
AG10. For each controlled entity that has non-controlling interests that are material to the reporting
entity, an entity shall disclose:
(a) Dividends or similar distributions paid to non-controlling interests; and

(b) Summarized financial information about the assets, liabilities, surplus or deficit and
cash flows of the controlled entity that enables users to understand the interest that
non-controlling interests have in the economic entity’s activities and cash flows. That
information might include but is not limited to, for example, current assets, non-current
assets, current liabilities, non-current liabilities, revenue and surplus or deficit.
AG11. The summarized financial information required by paragraph AG10(b) shall be the amounts
before inter-entity eliminations.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

AG12. For each joint venture and associate that is material to the reporting entity, an entity shall
disclose:

(a) Dividends or similar distributions received from the joint venture or associate; and

(b) Summarized financial information for the joint venture or associate (see paragraphs
AG14 and AG15) including, but not necessarily limited to:
(i) Current assets;

(ii) Non-current assets;

(iii) Current liabilities;

(iv) Non-current liabilities;

(v) Revenue;

(vi) Tax expense;

(vii) Pre-tax gain or loss recognized on the disposal of assets or settlement of

liabilities attributable to discontinuing operations; and

(viii) Surplus or deficit.

AG13. In addition to the summarized financial information required by paragraph AG12, an entity
shall disclose for each joint venture that is material to the reporting entity the amount of:

(a) Cash and cash equivalents included in paragraph AG12(b)(i);

(b) Current financial liabilities (excluding taxes and transfers payable, payables under
exchange transactions and provisions) included in paragraph AG12(b)(iii);

(c) Non-current financial liabilities (excluding taxes and transfers payable, payables under
exchange transactions and provisions) included in paragraph AG12(b)(iv);

(d) Depreciation and amortization;

(e) Interest revenue;

(f) Interest expense; and

(g) Income tax expense.

AG14. The summarized financial information presented in accordance with paragraphs AG12 and
AG13 shall be the amounts included in the IPSAS financial statements of the joint venture or
associate (and not the entity’s share of those amounts). If the entity accounts for its interest
in the joint venture or associate using the equity method:
(a) The amounts included in the IPSAS financial statements of the joint venture or
associate shall be adjusted to reflect adjustments made by the entity when using the
equity method, such as fair value adjustments made at the time of acquisition and
adjustments for differences in accounting policies.

(b) The entity shall provide a reconciliation of the summarized financial information
presented to the carrying amount of its interest in the joint venture or associate.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

AG15. An entity may present the summarized financial information required by paragraphs AG12
and AG13 on the basis of the joint venture's or associate's financial statements if:

(a) The entity measures its interest in the joint venture or associate at fair value in
accordance with IPSAS 36; and

(b) The joint venture or associate does not prepare IPSAS financial statements and
preparation on that basis would be impracticable or cause undue cost.

In that case, the entity shall disclose the basis on which the summarized financial information
has been prepared.
AG16. An entity shall disclose, in aggregate, the carrying amount of its interests in all individually
immaterial joint ventures or associates that are accounted for using the equity method. An
entity shall also disclose separately the aggregate amount of its share of those joint ventures’
or associates’:

(a) Revenue.

(b) Tax expense.

(c) Pre-tax gain or loss recognized on the disposal of assets or settlement of liabilities
attributable to discontinuing operations.

(d) Surplus or deficit.

An entity provides the disclosures separately for joint ventures and associates.

Commitments for Joint Ventures (paragraph 39(a))

AG17. An entity shall disclose total commitments it has made but not recognized at the reporting
date (including its share of commitments made jointly with other investors with joint control of
a joint venture) relating to its interests in joint ventures. Commitments are those that may give
rise to a future outflow of cash or other resources.

AG18. Unrecognized commitments that may give rise to a future outflow of cash or other resources
include:

(a) Unrecognized commitments to contribute funding or resources as a result of, for

example:

(i) The constitution or acquisition agreements of a joint venture (that, for example,
require an entity to contribute funds over a specific period).

(ii) Capital-intensive projects undertaken by a joint venture.

(iii) Unconditional purchase obligations, comprising procurement of equipment,

inventory or services that an entity is committed to purchasing from, or on behalf
of, a joint venture.

(iv) Unrecognized commitments to provide loans or other financial support to a joint

venture.

(v) Unrecognized commitments to contribute resources to a joint venture, such as

assets or services.

(vi) Other non-cancellable unrecognized commitments relating to a joint venture.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

(b) Unrecognized commitments to acquire another party’s ownership interest (or a portion
of that ownership interest) in a joint venture if a particular event occurs or does not
occur in the future.

AG19. The requirements and examples in paragraphs AG17 and AG18 illustrate some of the types
of disclosure required by paragraph 27 of IPSAS 20, Related Party Disclosures.

Interests in Structured Entities that are not Consolidated (paragraphs 40–48)

Structured Entities
AG20. A structured entity is an entity that has been designed so that the conventional ways in which
an entity is controlled are not the dominant factors in deciding who controls the entity. In the
case of entities such as departments or ministries where administrative arrangements or
legislation are often the dominant factors in deciding who has control of an entity, a
structured entity is an entity that has been designed so that administrative arrangements or
legislation are not the dominant factor in deciding who controls the entity. In the case of
entities where voting or similar rights are normally the dominant factor in deciding who has
control of an entity (which may be the case for some entities with profit objectives), a
structured entity is an entity that has been designed so that voting or similar rights are not the
dominant factor in deciding who controls the entity. Although binding arrangements frequently
occur between public sector entities, binding arrangements are not normally the dominant
factor in determining who controls an entity. Therefore the use of binding arrangements to
determine the relevant activities of an entity may indicate the existence of a structured entity.
Depending on the context a structured entity could be (i) an entity for which most of the
activities are predetermined, with the relevant activities limited in scope but directed through
binding arrangements or (ii) an entity for which any voting rights relate to administrative tasks
only and the relevant activities are directed by means of binding arrangements.

AG21. A structured entity often has some or all of the following features or attributes:

(a) Restricted activities.

(b) A narrow and well-defined objective, such as to carry out research and development
activities, provide a source of capital or funding to an entity or provide investment
opportunities for investors by passing on risks and rewards associated with the assets
of the structured entity to investors.

(c) Insufficient net assets/equity to permit the structured entity to finance its activities
without subordinated financial support.

(d) Financing in the form of multiple contractually linked instruments to investors that
create concentrations of credit or other risks (tranches).
AG22. Examples of entities that are regarded as structured entities include, but are not limited to:

(a) A partnership between a government and a private sector entity that is not a joint
venture, being a partnership established and directed by binding arrangements.

(b) Securitization vehicles.

(c) Asset-backed financings.

(d) Some investment funds.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

AG23. The mere fact that a government provides funding to another entity does not make that entity
a structured entity. Nor is an entity that is controlled by voting rights a structured entity simply
because, for example, it receives funding from third parties following a restructuring.

Nature of Risks from Interests in Structured Entities that are not Consolidated
(paragraphs 46–48)
AG24. In addition to the information required by paragraphs 46–48, an entity shall disclose
additional information that is necessary to meet the disclosure objective in paragraph 40(b).

AG25. Examples of additional information that, depending on the circumstances, might be relevant
to an assessment of the risks to which an entity is exposed when it has an interest in a
structured entity that is not consolidated are:

(a) The terms of an arrangement that could require the entity to provide financial support
to a structured entity that is not consolidated (e.g., liquidity arrangements or credit
rating triggers associated with obligations to purchase assets of the structured entity or
provide financial support), including:

(i) A description of events or circumstances that could expose the reporting entity to
a loss.

(ii) Whether there are any terms that would limit the obligation.

(iii) Whether there are any other parties that provide financial support and, if so, how
the reporting entity’s obligation ranks with those of other parties.

(b) Losses incurred by the entity during the reporting period relating to its interests in
structured entities that are not consolidated.

(c) The types of revenue the entity received during the reporting period from its interests in
structured entities that are not consolidated.

(d) Whether the entity is required to absorb losses of a structured entity that is not
consolidated before other parties, the maximum limit of such losses for the entity, and
(if relevant) the ranking and amounts of potential losses borne by parties whose
interests rank lower than the entity’s interest in the structured entity that is not
consolidated.

(e) Information about any liquidity arrangements, guarantees or other commitments with
third parties that may affect the fair value or risk of the entity’s interests in structured
entities that are not consolidated.

(f) Any difficulties a structured entity that is not consolidated has experienced in financing
its activities during the reporting period.
(g) In relation to the funding of a structured entity that is not consolidated, the forms of
funding (e.g., commercial paper or medium-term notes) and their weighted-average
life. That information might include maturity analyses of the assets and funding of a
structured entity if the structured entity has longer-term assets funded by shorter-term
funding.

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Appendix B

Amendments to Other IPSASs

IPSAS 1, Presentation of Financial Statements

Paragraphs 134 and 139 are amended and paragraph 153E added as follows:

134. In deciding whether a particular accounting policy should be disclosed, management considers
whether disclosure would assist users in understanding how transactions, other events, and
conditions are reflected in the reported financial performance and financial position. Disclosure of
particular accounting policies is especially useful to users when those policies are selected from
alternatives allowed in IPSASs. An example is disclosure of whether an entity applies the fair value
or cost model to its investment property (see IPSAS 16, Investment Property) a venturer recognizes
its interest in a jointly controlled entity using proportionate consolidation or the equity method (see
IPSAS 8, Interests in Joint Ventures.) …

139. Some of the disclosures made in accordance with paragraph 137 are required by other IPSASs.
For example, IPSAS 38, Disclosure of Interests in Other Entities, requires an entity to disclose the
judgments it has made in determining whether it controls another entity IPSAS 6 requires an entity
to disclose the reasons why the entity’s ownership interest does not constitute control, in respect of
an investee that is not a controlled entity, even though more than half of its voting or potential
voting power is owned directly or indirectly through controlled entities. IPSAS 16, Investment
Property, requires disclosure of the criteria developed by the entity to distinguish investment
property from owner-occupied property, and from property held for sale in the ordinary course of
business, when classification of the property is difficult.
153E. IPSAS 35, Consolidated Financial Statements and IPSAS 38 issued in January 2015,
amended paragraphs 4, 12, 88(n), 95(d), 97, 103, 118, 134, 135 and 139. An entity shall apply
those amendments when it applies IPSAS 35 and IPSAS 38.

IPSAS 30, Financial Instruments: Disclosures

Paragraph AG6 is amended and paragraph 52A is added as follows:
AG6. The disclosures required by paragraphs 38–49 shall be either given in the financial statements or
incorporated by cross-reference from the financial statements to some other statement, such as a
management commentary or risk report, that is available to users of the financial statements on the
same terms as the financial statements and at the same time. Without the information incorporated
by cross-reference, the financial statements are incomplete. The use of such cross-referencing may
be subject to jurisdictional restrictions.
52A. IPSAS 35, IPSAS 37, Joint Arrangements, and IPSAS 38, Disclosure of Interests in Other
Entities, issued in January 2015, amended paragraphs 3(a) and AG6. An entity shall apply
those amendments when it applies IPSAS 35, IPSAS 37 and IPSAS 38.

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Basis for Conclusions

This Basis for Conclusions accompanies, but is not part of, IPSAS 38, Disclosure of Interests in Other
Entities.

Objective

BC1. This Basis for Conclusions summarizes the IPSASB‘s considerations in reaching the
conclusions in IPSAS 38. As this Standard is based on IFRS 12, Disclosure of Interests in
Other Entities (issued in 2011, including amendments up to December 31, 2014), issued by
the IASB, the Basis for Conclusions outlines only those areas where IPSAS 38 departs from
the main requirements of IFRS 12.

Overview

BC2. In 2012 the IPSASB commenced work on a project to update those IPSASs that dealt with
accounting for interests in controlled entities, associates and joint ventures. In October 2013
the IPSASB issued Exposure Drafts (EDs) 48 to 52 which were collectively referred to as
Interests in Other Entities. ED 52, Disclosure of Interests in Other Entities, was based on
IFRS 12, Disclosure of Interests in Other Entities, having regard to the relevant public sector
modifications to the disclosure requirements in IPSAS 6, Consolidated and Separate
Financial Statements, IPSAS 7, Investments in Associates, and IPSAS 8, Interests in Joint
Ventures. In January 2015 the IPSASB issued five new IPSASs, including IPSAS 38. These
new IPSASs supersede IPSAS 6, IPSAS 7, and IPSAS 8.

Significant Judgments and Assumptions (paragraphs 12 to 14)

BC3. The IPSASB noted that paragraph 7 of IFRS 12, , requires that an entity disclose information
about significant judgments and assumptions it has made in determining the nature of its
interest in another entity (for example, control, joint control or significant influence). Although
the IPSASB agreed that users need information about how an entity has made these
judgments, it noted that a public sector entity could be required to make many judgments and
assumptions in relation to particular entities, and that the disclosure of such judgments and
assumptions and changes in such judgments from period to period could result in
unnecessary detail. The IPSASB also noted that, in the public sector, decisions about the
reporting entity may be made having regard to frameworks developed in conjunction with
other parties such as legislative bodies or oversight committees. The assessments made in
respect of the classification of certain types of entities as controlled entities, jointly controlled
entities, or entities subject to significant influence may be recorded in public documents other
than the financial statements. The IPSASB therefore agreed to require that an entity disclose
the methodology used to decide the existence or absence of control, joint control of an
arrangement or significant influence, either in the financial statements themselves or by way
of reference to another publicly available document.

Definition of Structured Entity (paragraphs 7 and AG20 to AG23)

BC4. The IPSASB noted that the definition of “structured entity” in IFRS 12 focusses on voting or
similar rights, which tend to occur less frequently or have less significance in the public sector
than in the private sector. However, the IPSASB agreed that it was still appropriate to refer to
voting or similar rights in the definition of a structured entity because voting or similar rights
may be the predominant way in which a public sector entity establishes control over another

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

entity. The IPSASB decided to modify the definition of a structured entity to highlight that they
occur when the conventional ways in which an entity is controlled are not the dominant
factors in deciding who controls the entity and encompass the broader range of
circumstances that occur in the public sector.

BC5. The IPSASB identified administrative arrangements and statutory provisions (legislation) as
common means by which control may be determined for many public sector entities.
Accordingly, the IPSASB took the view that the reference to “similar rights” in the definition of
structured entity should encompass administrative arrangements and statutory provisions.
Thus, the ED proposed that entities for which administrative arrangements or statutory
provisions are dominant factors in determining control of the entity would not be structured
entities. The IPSASB considers that the disclosures required of structured entities are
appropriate, but that in order to be useful they need to be focused on a limited class of
entities (consistent with the intention of the IASB’s requirements in relation to entities
applying IFRS 12).

BC6. Some respondents to ED 52 were concerned that the definition of a structured entity could be
read as suggesting that an entity was operating in an unauthorized way or in contravention of
laws. The IPSASB noted that this was not its intention and reviewed the definition of
structured entities to see if any clarification was required. The IPSASB noted that the
definition does not suggest that a structured entity would not be required to comply with
relevant statutes or administrative arrangements. Rather the definition allows for the
possibility that a small group of entities may have been established under different
arrangements from the arrangements commonly used to establish similar entities.

Investment Entities (paragraphs 27 to 34)

BC7. The IPSASB considered the investment entity disclosures required by IFRS 12 and
concluded that those disclosures were particularly appropriate in the public sector context.
The IPSASB noted that, as a consequence of the requirements in IPSAS 35 most public
sector entities with investment entities would be required to make these disclosures.

BC8. The IPSASB considered whether a non-investment controlling entity accounting for
investment entities at fair value should be required to make any additional disclosures. The
IPSASB considered that the disclosures required in relation to investment entities were
appropriate and should also be provided in the consolidated financial statements of a
controlling entity with investment entities.

Non-quantifiable Ownership Interests (paragraphs 49 and 50)

BC9. The scope of IPSAS 36, Investments in Associates and Joint Ventures, is limited to
“quantifiable ownership interests”. The IPSASB noted that respondents supported this
proposal, but considered that disclosure of information about an entity’s non-quantifiable
ownership interests in other entities would be appropriate. The IPSASB agreed to require, in
this Standard, disclosure of information about non-quantifiable ownership interests.

Controlling Interests Acquired with the Intention of Disposal (paragraphs 50 to 57)

BC10. Some respondents to ED 52 proposed that the IPSASB require disclosures about temporary
control (either by developing a standard based on IFRS 5, Non-current Assets Held for Sale
and Discontinued Operations, or by adding disclosures to this Standard). The IPSASB

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

considered, and rejected, the idea of requiring disclosure of all controlled investments held
for sale on the grounds that it was too broad. Nevertheless, the IPSASB agreed that some
disclosure about controlling interests intended to be held for a limited time could be of interest
to users. For example, the IPSASB considered that users would be interested in information
about interventions to prevent the consequences of the failure of an entity, or acquisitions of
entities which will subsequently be redistributed to achieve policy objectives. The IPSASB
agreed that its objective was to require disclosure of information about controlling interests
where there was an active intention to dispose of the interest, both at the time of the
acquisition and at the reporting date.

BC11. In considering the information to be disclosed the IPSASB agreed that the requirements
should be general in nature. The IPSASB acknowledged that the circumstances in which a
controlling interest is acquired or disposed of could vary widely (for example, a controlling
interest might be acquired by virtue of providing guarantees). In addition, entities might wish
to provide information about the transactions or events giving rise to such controlling
interests, and the IPSASB did not wish to be unnecessarily prescriptive about the type of
information that should be provided. The IPSASB therefore agreed to require disclosures to
assist users to understand the impact of consolidating such controlling interests on the
consolidated financial statements by reference to the effect on the main aspects of the
financial statements.

BC12. The IPSASB acknowledged that the expected method of disposal might be under
consideration at the reporting date and that plans might change from one period to another. It
also acknowledged that disposal might occur in stages. The IPSASB therefore agreed to
require disclosure of the “current status of the approach to disposal”.

BC13. The IPSASB considered whether to limit the disclosures to situations where control was
expected to exist for a specified time period, such as one or two years. The IPSASB decided
not to specify a time period. It considered that limiting the disclosures to controlling interests
and situations where there was still an active intention to dispose of the interest would lead to
informative disclosures without overwhelming readers with too much detail.

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 DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Comparison with IFRS 12

IPSAS 38, Disclosure of Interests in Other Entities is drawn primarily from IFRS 12, Disclosure of
Interests in Other Entities (issued in 2011, including amendments up to December 31, 2014). At the time
of issuing this Standard, the IPSASB has not considered the applicability to public sector entities of
IFRS 9, Financial Instruments. References to IFRS 9 in IFRS 12 are therefore replaced by references to
the IPSASs dealing with financial instruments.

The main differences between IPSAS 38 and IFRS 12 are as follows:

• IPSAS 38 uses different terminology, in certain instances, from IFRS 12. The most significant
examples are the use of the terms “net assets/equity,” “economic entity,” “controlling entity,”
“controlled entity”, “revenue” in IPSAS 38. The equivalent terms in IFRS 12 are “equity,” “group,”
“parent,” “subsidiary” and “income.”

• Commentary additional to that in IFRS 12 has been included in IPSAS 38 to clarify the applicability
of the Standard to accounting by public sector entities.

• The definition of a structured entity in IPSAS 38 acknowledges the differing ways in which control
may be obtained in the public sector.

• IPSAS 38 requires that a controlling entity that controls an investment entity, and is not itself an
investment entity, disclose information in respect of unconsolidated investment entities. IFRS 12
does not require such disclosures by a controlling entity that controls an investment entity, and is
not itself an investment entity because IFRS 10 requires that such a controlling entity consolidate
controlled investment entities.

• IPSAS 38 requires the disclosure of information about non-quantifiable ownership interests.

IFRS 12 does not specify such disclosures.
• IPSAS 38 requires the disclosure of information about interests in entities that were acquired with
the intention of disposal and which are still held for disposal. IFRS 12 does not specify such
disclosures. However, IFRS 5, Non-current Assets Held for Sale and Discontinued Operations
requires disclosures about non-current assets held for sale.

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